THÔNG TIN TÀI LIỆU
CHAPTER 16 • General Equilibrium and Economic Efficiency 627 We discussed the question of technical efficiency in Chapter As we saw in Example 6.1, as more and more health care is produced, there are diminishing returns, so that even if we are on the production frontier, it will take more and more resources to eke out small gains in health outcomes (e.g., increases in life expectancy) But we saw that there is reason to believe that the health care industry is operating below the frontier, so that if inputs were used more efficiently, better health outcomes could be achieved with little or no increase in resources For example, for every office-based physician in the United States there are 2.2 administrative workers This is 25 percent higher than the equivalent number in the United Kingdom, 165 percent more than the Netherlands, and 215 percent more than Germany It appears that substantially more time and expense is devoted to navigating the complex credentialing, claim reporting, verification, and billing requirements of various insurers in the U.S relative to other developed countries In addition, a number of low cost, highly effective treatments seem to be under-prescribed in the United States Beta blockers, for example, cost just a few cents per dose and are believed to reduce heart attack mortality by 25%, yet in some parts of the country they are rarely prescribed What about output efficiency? It has been suggested that the increasing fraction of income being devoted to health expenditures in the United States is evidence of inefficiency But, as we saw in Example 3.4, this could simply reflect a strong preference for health care on the part of the U.S population, whose incomes have generally been increasing The study underlying that example calculated the marginal rate of substitution between health related and nonhealth related goods and found that as consumption increases, the marginal utility of consumption for non-health related goods falls quickly As we explained, this should not be surprising; as individuals age and their incomes increase, an extra year of life expectancy becomes much more valuable than a new car or a second home Thus an increasing share of income devoted to health is entirely consistent with output efficiency SUMMARY Partial equilibrium analyses of markets assume that related markets are unaffected General equilibrium analyses examine all markets simultaneously, taking into account feedback effects of other markets on the market being studied An allocation is efficient when no consumer can be made better off by trade without making someone else worse off When consumers make all mutually advantageous trades, the outcome is Pareto efficient and lies on the contract curve A competitive equilibrium describes a set of prices and quantities When each consumer chooses her most preferred allocation, the quantity demanded is equal to the quantity supplied in every market All competitive equilibrium allocations lie on the exchange contract curve and are Pareto efficient The utility possibilities frontier measures all efficient allocations in terms of the levels of utility that each of two people achieves Although both individuals prefer some allocations to an inefficient allocation, not every efficient allocation must be so preferred Thus an inefficient allocation can be more equitable than an efficient one Because a competitive equilibrium need not be equitable, the government may wish to help redistribute wealth from rich to poor Because such redistribution is costly, there is some conflict between equity and efficiency An allocation of production inputs is technically efficient if the output of one good cannot be increased without decreasing the output of another A competitive equilibrium in input markets occurs when the marginal rate of technical substitution between pairs of inputs is equal to the ratio of the prices of the inputs The production possibilities frontier measures all efficient allocations in terms of the levels of output that can be produced with a given combination of inputs The marginal rate of transformation of good for good increases as more of good and less of good are produced The marginal rate of transformation is equal to the ratio of the marginal cost of producing good to the marginal cost of producing good Efficiency in the allocation of goods to consumers is achieved only when the marginal rate of substitution
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